Merchants Bancorp Debt Disclosure
Note 14: Borrowings
Borrowings were comprised of the following at December 31, 2025 and 2024:
December 31, | ||||||
| 2025 | | 2024 | |||
(In thousands) | ||||||
Federal Reserve discount window borrowings | $ | — | $ | 50,000 | ||
Subordinated debt | 71,800 | 71,800 | ||||
FHLB advances | 3,762,858 | 4,172,030 | ||||
Credit-linked notes, net of debt discount | — | 84,358 | ||||
Other borrowings |
| 7,934 |
| 7,934 | ||
Total borrowings | $ | 3,842,592 | $ | 4,386,122 | ||
Federal Reserve Discount Window Borrowings
Federal Reserve discount window borrowings are secured by the collateral value of commercial, agricultural, construction and one-to-four family residential real estate loans totaling $3.4 billion and $3.1 billion as of December 31, 2025 and 2024, respectively. This arrangement has a maximum borrowing limit of collateral pledged multiplied by an advance rate. Borrowing maturities can range from 24 hours to up to a term of 90 days. Life to date, all Company borrowings were for a 24-hour period. As of December 31, 2025 and 2024, the outstanding balance was $0 and $50.0 million, respectively.
Subordinated Debt
The Company entered into a warehouse financing arrangement in April 24, 2018, which was revised in December 2023, whereby a customer agreed to invest up to $60.0 million in the Company’s subordinated debt. The subordinated debt balance as of both December 31, 2025 and 2024 was $41.8 million. As of December 31, 2025, interest on the debt is paid monthly by the Company at a rate equal to SOFR, plus 300 basis points, plus additional interest equal to 50% of the earnings generated. There is also a guaranteed interest rate floor associated with these earnings. The agreement is automatically renewed annually on June 30th for one or more terms of two years each unless either party notifies the other party at least 180 days prior to its renewable date, of its desire not to continue the relationship. As of December 31, 2025, neither party had made a notification of its intent to cancel this arrangement.
Additionally, the Company entered into another warehouse financing agreement on April 14, 2023, which was revised on July 20, 2023, whereby a customer agreed to invest up to $30.0 million in the Company’s subordinated debt. The subordinated debt balance as of both December 31, 2025 and 2024 was $30.0 million. As of December 31, 2025, interest on the debt is paid monthly by the Company at a rate equal to SOFR, plus 300 basis points, plus additional interest equal to 50% of the earnings generated. The agreement is automatically renewed annually on June 30th for one or more terms of two years each unless either party notifies the other party at least 180 days prior to its renewable date, of its desire not to continue the relationship. As of December 31, 2025, neither party had made a notification of its intent to cancel this arrangement.
FHLB Advances
FHLB advances are secured by the collateral value of mortgage loans totaling $4.4 billion and $4.2 billion at December 31, 2025 and 2024, respectively. In addition, securities available for sale, securities held to maturity, and securities purchased under agreements to resell with a carrying value of $1.5 billion and $1.4 billion were pledged as of December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, the outstanding balances were $3.8 billion and $4.2 billion, respectively. At December 31, 2025 the FHLB advances had interest rates ranging from 0.00% to 3.97% and ranged from 2.78% to 4.48% at December 31, 2024. These rates were subject to restrictions or penalties in the event of prepayment.
On May 27, 2025, the Company entered into an interest free, fixed-rate community development advance debt agreement with the FHLB. The balance of the advance was $2.5 million as of December 31, 2025, and the full principal balance matures on May 24, 2030.
On December 16, 2025, the Company entered into a new variable-rate debt agreement with the FHLB for an advance that has put and call options. The balance of the advance was $2.0 billion as of December 31, 2025, and matures on March 16, 2026. The variable interest rate is based on the , plus 15 basis points, which was 3.79% on December 31, 2025. The FHLB has a put option to cancel the agreement 60 days after the initial execution date and the Company has a call option to cancel the agreement at any time, with one day’s notice.
On December 31, 2025, the Company entered into a new variable-rate debt agreement with the FHLB for an advance that has put and call options. The balance of the advance was $1.8 billion as of December 31, 2025, and matures on March 31, 2026. The variable interest rate is based on the , plus 15 basis points, which was 3.79% on December 31, 2025. The FHLB has a put option to cancel the agreement 60 days after the initial execution date and the Company has a call option to cancel the agreement at any time, with one day’s notice.
Credit-Linked Notes
On March 30, 2023, the Company issued and sold $158.1 million senior credit-linked notes, due May 26, 2028. The net proceeds of the offering were approximately $153.5 million. The repayment of principal on the notes was initially linked to an approximately $1.1 billion reference pool of loans originated under Merchants Bank’s healthcare commercial real estate lending program, but the notes were not secured by the loans. The notes provided periodic payments of interest in addition to payment of principal over the life of the note and these values were tied to the performance of the loans. Therefore, the notes effectively transferred credit risk in excess of the first 1% of losses on the reference pool of loans. The reduction in risk weighted assets provided additional balance sheet capacity and benefited capital ratios for additional growth in the existing loan pipeline.
The notes accrued interest at a rate equal to SOFR plus 15.50% and interest was paid monthly.
The notes were secured by a restricted collateral account which the Company was required to maintain with a third-party financial institution. The collateral account maintained an amount equal to at least the aggregate unpaid principal of the notes.
In December 2025, the Company fully repaid the credit-linked notes issued, also releasing all restricted cash collateral.
Other Borrowings
On May 4, 2023, the Company entered into a debt agreement that was ultimately funded from a Sponsor Improvement Contribution as part of a low-income tax credit syndication transaction. The debt balance as of December 31, 2025 and 2024 was $7.9 million and $7.9 million, respectively. As of December 31, 2025, interest on the debt is paid by the Company at a rate equal to 1%. The agreement has a maturity date of December 31, 2047.
Maturities
Maturities of borrowings were as follows at December 31, 2025:
| ||||||||||||
Subordinated | FHLB | Other | Borrowings | |||||||||
Debt | Advances | Borrowings | Total | |||||||||
Due within one year | $ | — | $ | 3,760,026 | $ | — | $ | 3,760,026 | ||||
Due in one year to two years |
| 71,800 |
| 62 |
| — |
| 71,862 | ||||
Due in two years to three years |
| — |
| 59 |
| — |
| 59 | ||||
Due in three years to four years |
| — |
| 211 |
| — |
| 211 | ||||
Due in four years to five years |
| — |
| 2,500 |
| — |
| 2,500 | ||||
Thereafter |
| — |
| — |
| 7,934 |
| 7,934 | ||||
$ | 71,800 | $ | 3,762,858 | $ | 7,934 | $ | 3,842,592 | |||||
At December 31, 2025, the Company had excess borrowing capacity of approximately $5.3 billion with the FHLB and the Federal Reserve discount window, based on available collateral.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 4, 2022 | |
| 2020 | Mar 5, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 28, 2018 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.